Motor Trades Welcomes Car Market Finance

The Australian Automobile Dealers Association (AADA) and the Motor Trades Association of Australia (the latter being the national federation which includes AADA), today welcomed and thanked the Australian Government, the Prime Minister and they hope the Australian Opposition for the co-ordinated, over-arching resolution of the financial and liquidity crisis for motor dealers and traders arising from the global financial crisis and the market liquidity evaporation.

Both Associations have been working closely with the Government and Officials and the particular Task Force appointed immediately by the Government on recognition of this crisis occasioned by the withdrawal from the motor vehicle finance market of GE Money and GMAC (General Motors Acceptance Corporation) on respectively 23 and 24 October.

Much time has passed between those dates and the present; even while time has been of the essence, but the task of recognising, addressing and designing an appropriate response has been a hitherto unknown task, immensely complex and requiring the highest level of expert consideration.

The announcement by the Government we think meets and reflects those burdens and that it will do what is necessary to correct these circumstances.

AADA and MTAA and all of the related trades, and all our Member bodies, want it to be abundantly clear that this is not a bail-out of car dealers and the motor trades; and not so in any way, and cannot be so proposed or represented. We say this is a market failure. That market failure requires government and society to intervene. That intervention is a public good and that it can, and has in this case, secured a market correction. That is entirely appropriate and valuable.

No motor trader through this measure will secure market money at a lower cost. There are no distortions to the hitherto operating market in these arrangements and the liquidity that has been secured is all that is necessary to keep the market appropriately operating.

Absent these measures the cascading and corollary and collateral effects of the loss of car dealers, and their contribution to the economy through their trade would have been horrific in the impacts on employment, GDP and confidence.

The Associations have not been able before this to say so for reasons of the need for avoidance of these prospects, but now observe this is what requires these measures.

Nothing like this has been seen before. No solution such as this has ever before been necessary.

2.


Absent these measures we believed and were able to document to Government that Australia would have lost five hundred car dealers from its near to 1,500 new car franchised dealers, with 3,500 outlets, would have lost up to 75,000 jobs and would have seen most all of the present stock of motor vehicles fire-saled through liquidations at anything up to below 50 percent of the list price. That would have wiped-out the valuations of all new and used cars, for all persons and parties holding a motor vehicle as an asset and in many cases could have caused a cascading call for more security from the financiers of those parties.

Into the bargain, the cascading effects of the complete cessation and devaluation of the retail new and used market could have transmitted to the wholesale manufacturing and import markets, given the present extraordinarily high levels of stock occasioned by the 22 percent turn-down in demand, and that would have produced even more write-downs on new stock that would have become unavoidable and with chaos in all elements of the market being the result.

In the corrective endeavour undertaken mutually by us, the Government, administration and senior officers to address these circumstances, there have been persons who have contributed greatly to this present outcome. MTAA and AADA would particularly want to recognise the efforts of the Secretaries of the Department of Prime Minister and Cabinet and the Treasury and their Officers in securing this outcome which we believe is very good public policy, in the public interest and probably unavoidable for stability and security in the markets for our goods in the face of the present turmoil.

Some have said these circumstances are the product of the guarantees offered in the financial markets. This is completely wrong; we dismiss that entirely and we can demonstrate that this is not the case. The circumstances the retail motor trades faced are entirely due to the global economic and financial crisis and the situations caused by that for the parent companies of the financiers to our trades in Australia who precipitously determined to leave the market.

While these measures are welcome and we are grateful for them, it is the case that if there is not time and capacity made available and secured with our financiers for them to take them up on the part of motor vehicle dealers and other motor traders, they will not work and therefore we shall engage further with Government to ensure that there is enough time in transition for us to construct arrangements by which we can benefit from them and protect this important part of the Australian Economy.

ENDS

5 December 2008

For further information please contact Michael Delaney, Executive Director of MTAA on
(02) 6273 4333.